Mortgage after an IVA

Getting a mortgage after an IVA (Individual Voluntary Arrangement) has finished may seem difficult, but is certainly possible. Although an IVA will remain on your credit report for 6 years; that’s not to say that you won’t be able to get a mortgage in this time. Some lenders will review an application the day after your IVA has ended.

Speak to us today about your situation and we can advise on the right path for you.

It’s probably fairly obvious that getting a mortgage after an IVA will be more difficult than with a clean credit report. What isn’t so obvious; however, are the steps you can take to give yourself the best chance of being approved. Here are some of the ways you can do to get a mortgage once you’ve been in an IVA:

How we can help

How to get a mortgage after an IVA

Knowing about what an IVA is and whether you can get a mortgage after one, you may be wondering how to go about getting a mortgage after an IVA. Here’s a general guideline of what you should look at to apply for a mortgage after an IVA.

Contact a specialist mortgage broker

Lenders will still want you to disclose a previous IVA when you apply for a mortgage, going to a specialist broker can help you find out which lenders are likely to accept you, and give you a scope of the rates and products available after an IVA. It’s important to go to a specialist broker if you choose to go to one, as it’s likely you’ll need a specialist lender, not a usual high-street lender. At Clever Mortgages we have access to 8 specialist mortgage lenders that consider applicants with IVAs, so it’s worth enquiring.

If you’d like some help finding the right mortgage for you after an IVA, get in touch with one out our specialist advisors!

Find a mortgage

Once you’ve found a property you’d like to purchase, found a lender that will approve you and make a successful offer on the property, you should be able to make a formal mortgage application as usual. See our guide to applying for a mortgage.

A few things that can speed up the process beforehand

Request a competition certificate

First of all, you should request a certificate of completion from your insolvency practitioner as soon as you finish your IVA. This can be used to prove to lenders that you’ve completed your IVA successfully and made all your repayments.

Request a completion certificate

The first thing you should do after finishing your IVA is to request a certificate of completion. Your insolvency practitioner (IP) will be able to provide you with this. It can be used as a way to evidence to lenders that you have successfully completed your IVA.

Save up your deposit

Generally, the chances of being accepted for a mortgage increase with a larger deposit. After finishing an IVA, you’ll have work to do on your credit report but even with a good credit score, an IVA might still need to be declared. A larger deposit helps offset the risk for the lender, making them more likely to offer you a mortgage with better rates.

The more time that passes after finishing your IVA, the better- in the eyes of the lender. If you wait long enough, using the time to rebuild your credit and prove you’re a responsible borrower, you could access a mortgage with as little deposit as 5% with a 95% mortgage.

You should be used to budgeting and paying your IVA over the past few years. It’s worth looking at saving the money you used to pay into your IVA into a savings account to help save for your deposit.

Assuming your IVA payment was £250 per month, after 5 years that amounts to £15,000 – which would pay for a deposit on a £150,000 house should you be eligible for a 90% LTV mortgage, which could be possible 5 years following the end of your IVA. – read more here

Get a good deposit together

Whilst some lenders will consider you for a mortgage, the higher your deposit, the higher your chances of approval. In your first year after your IVA or DMP (Debt Management Plan) has finished, it could be that you need a deposit as high as 50% of the property price in order for a lender to consider you. Even with a good deposit, adverse credit can affect you when applying for a mortgage and it’s likely you will only be eligible for higher rates.

As time goes on, chances are you won’t need to supply such a high deposit or incur as high-interest rates, provided you’ve managed your credit well. It could be that after 5 or 6 years of good credit management, you may be eligible for 90% or even 95% mortgages.

Save what you used to pay into your IVA

If you’re finding it hard to get a mortgage without stumping up a huge deposit, saving the amount you used to pay into your IVA could seriously help. You would have been used to making regular payments over 5-6 years since the start date of your IVA, so being disciplined and saving this will leave you in good stead for a deposit after a few years. This can also get you into a habit of making the repayments on your mortgage.

Assuming your IVA payment was £250 per month, after 5 years that amounts to £15,000 – which would pay for a deposit on a £150,000 house should you be eligible for a 90% LTV mortgage, which could be possible 5 years following the end of your IVA.

Work on improving your credit score

An IVA will likely leave you with a poor credit score. It’s worth working on improving this before applying for a mortgage to increase your access to better rates, products and deals. Luckily, there are plenty of ways to help improve your credit score.

  • Make sure you’re on the electoral roll. This will help lenders confirm your identity and address.
  • Close your unused accounts. If you’re not using a credit account, you should close it if you want to improve your credit report. Some lenders look at available credit limits when deciding whether to approve you for a mortgage, having fewer open accounts with on-time repayments may appear better than many open, but unused accounts.
  • Make sure the credit you take out is responsible and beneficial to your score. Proving your ability to repay credit is something lenders view favourably, but credit like payday loans shows an inability to manage money and lenders look unfavourably on it. Check the type of credit you’re taking is viewed as responsible.
  • Space out your credit applications. Making several applications over a short period of time can harm your credit score, it can give the impression that you’re reliant on credit and lenders view this as risky. Spacing out your applications and ensuring you can make the repayments shows you’re not reliant on credit, you can make payments on time and you take consideration before entering a new credit agreement.
  • Make sure you make all repayments for outstanding debts on time and as soon as possible. Creating a thorough financial budget plan can help you do this, paying off outstanding debts can also leave you with more disposable income to put towards a larger deposit.

For more information on improving your credit score, see here

Improve your credit score

It will always be difficult to achieve a good credit score with an IVA or other debt solution showing on your credit file. However, by doing your best to manage your credit responsibly, it can leave you in a better position for when your IVA has less influence on your credit file. Because of this, it’s likely that your credit score has started to improve since completing your IVA. There are also a number of things you can do to improve your score even further.

Close unused accounts

You should close any credit accounts you have open that you don’t use. Some lenders will not only look at the outstanding debts on your credit file but also the credit limit you have available. Fewer, well-managed accounts may be better than a number of unused ones.

Make sure you’re on the electoral roll

Lenders will want to confirm your identity and address as part of an application, the best way to do this is making sure you’re on the electoral roll.

Have responsible credit

Whilst you shouldn’t take out credit for the sake of it, having responsible credit is beneficial to your credit score. Displaying an ability to repay credit that is lent to you is something lenders look on favourably. Repaying credit responsibly is a good way to repair your credit score.

Don’t make too many applications at once

Making a number of credit applications in quick succession can harm your credit rating. Lenders may think you are reliant on credit to supplement your income. Even if you’re making applications for different products, it’s best to space them out. If you’re thinking of making applications to see who will accept you or give you the best rate, you should consider applying through a specialist mortgage broker rather than high street lenders.

Mortgage brokers look through your circumstances and place you with the most appropriate mortgage lender on their panel. This means there is only one application made with a lender as they will place you with whoever is most suitable.

Clever Mortgages have access to 8 lenders who would consider lending into or after the completion of an IVA (Individual Voluntary Arrangement). To see how we could help please Read More.

Frequently asked questions

Can I get a mortgage during an IVA?

If you’re in an IVA, it’s likely that you’ll struggle to find a lender that will approve your mortgage application. This doesn’t mean you won’t be able to find one, however it’s probable that any lender willing to accept an applicant with an active IVA will have very high interest rates, and if you’ve struggled with repayments in the past then this may affect you adversely in the long-term.

An IVA stays on your credit report for 6 years from the date of approval and often decreases your credit score. Most people with IVA’s have a bad, or poor credit score and this is something lenders consider when deciding whether to approve someone for a mortgage.

You also need to remember that during an IVA, you’re not allowed take out credit (borrow) over £500 during your term without getting written permission from your insolvency practitioner and it’s

unlikely your practitioner will allow you to do this, unless it’s for something like remortgaging to pay off your IVA.

It’s usually best to wait until you’ve completed your IVA to apply for a mortgage. It could be possible to get a mortgage during an IVA- if you can find a lender and get permission from your insolvency practitioner- but waiting until the IVA has been completed increases your eligibility for better rates and products.

How long does an IVA stay on your credit report?

An IVA will stay on your credit report for 6 years, starting from the date your IVA was approved. Once you have completed the term of your IVA it will be marked as complete but will still be on your record until the 6-year period ends.

So, if your IVA has a term of 5 years, it will be removed from your credit report 1 year after completion.

Your IVA will also be added to the Individual Insolvency Register, but it’ll be removed 3 months after your IVA ends. (https://www.gov.uk/options-for-paying-off-your-debts/individual-voluntary-arrangements) (https://www.gov.uk/search-bankruptcy-insolvency-register)

Once your IVA finishes, you should request a certificate of completion from your insolvency practitioner. This can be used to prove you’ve finished your IVA.

Remortgaging in an IVA

If you’re wanting to remortgage in order to release equity to settle your IVA, there is a chance that your insolvency practitioner will approve, especially if it lowers your current monthly expenditures so you can pay more towards your IVA or pay it off in full with the money acquired through remortgaging. Your IVA will probably have negatively impacted your credit score, so it’s likely you’ll have to go through a specialist lender to remortgage.

Luckily, our expert brokers at Clever Mortgages have access to 8 of these specialist lenders and a wealth of experience helping people in an IVA remortgage. If you’re in an IVA and want to remortgage, get in touch with one of our expert advisors.

Can I get a mortgage straight after an IVA has been settled?

Once your IVA has been settled successfully, you’re in a much better financial position to apply for a mortgage and it’s far more likely you’ll be accepted, however it could be difficult. An IVA stays on your credit report for 6 years from the date of approval which can have a negative impact on your credit score, making it hard to find a high-street lender that will approve your mortgage application if the IVA is still on your credit report. This doesn’t mean it’s the end of the road though- you could still get a mortgage after an IVA with fairly competitive rates though a specialist lender. Many specialist lenders consider applicants with bad credit, even if it has been caused by a recent IVA- and here at Clever Mortgages we have access to these specialist lenders, helping thousands of people with a poor credit history get onto the property ladder.

Get in touch with one of our specialist advisors to find out more.

Can I get a mortgage once an IVA is off my credit report?

Once your IVA has been settled and has dropped off your credit report, assuming you can prove you can make repayments, you could get a mortgage. Many people chose to wait for their IVA to drop off their credit report before applying for a mortgage to access better rates and products, as lenders rarely view a recent IVA or one still on your credit record favourably.

It’s likely you’re aware of the negative impact your IVA might have had on your credit score, and if you’re choosing to wait for the removal of your IVA, or if it’s already been removed, this is an ideal time to look towards building your credit rating and cultivating a healthy credit report to show lenders you’re a responsible borrower.

It’s important to be aware that mortgage providers will often ask you to declare if you’ve ever had credit issues in the past, such an in IVA. This may affect eligibility but being able to prove you can make the repayments in ways such as repairing your credit score, paying off your debts and proving a stable income will increase your chances of being accepted.

It’s a good idea to speak to a broker before making a mortgage application if you’ve been in an IVA. When you make a mortgage application, the lender will do a hard credit check and should it be declined, this may affect your credit score. Going through one of our specialist brokers means you’ll have a clear indication of which lenders are likely to accept you before you apply and have a better scope of rates and products giving you a far more informed decision.

If you’re thinking about getting onto the property ladder after an IVA, get in touch with one of our specialist advisors now!

What deposit will I need if I’ve had an IVA?

If you’ve waited for your IVA to be removed from your credit report and improved your credit score, depending on your financial situation, you might be able to get a mortgage with as little as 5% or 10% deposit through a specialist lender. (https://www.which.co.uk/money/mortgages-and-property/mortgages/getting-a-mortgage-with-poor-credit/how-to-get-a-mortgage-after-an-iva-asn025y29z50#headline_6)

The larger the deposit you manage to save after an IVA, the more chance you have of being accepted for a mortgage with better rates, this is because lenders view larger deposits as a less risky investment. If you’ve been paying an IVA for several years, you’ll be used to budgeting to pay the monthly sum, once your IVA has been settled you could use the money to save towards a deposit instead, especially if you’re seeking a mortgage fairly soon after your IVA has been completed.

To access the best rates and products after an IVA, it’s best to save up as much as possible for your deposit before applying for a mortgage, you could save as little as 5% but a 15%-25% deposit will give you a greater chance of being accepted for a mortgage with lower interest rates and better deals. As most lenders will ask you disclose previous credit agreements like an IVA, a larger deposit will help the lender view you as a less risky investment after your previous financial problems and increase the chances of a lender offering a more attractive deal. 

Helpful information

What is an IVA?

An Individual Voluntary Agreement is a legal agreement set up between you and your creditors to pay back all, or some of your debt affordably over a set period of time. It must be set up by a qualified insolvency practitioner, agreed on by your creditors and approved by the court.

What is an insolvency practitioner?

An insolvency practitioner is someone who’s licensed and qualified to act on the behalf of companies, businesses and individuals who are facing insolvency- an inability to repay money owed.

Insolvency practitioners can assist with highly complex financial situations, negotiating with creditors and helping to create and enforce an affordable payment plan to get you out of debt.

What is a creditor?

A creditor is the person, business or company that you owe money to.

How do IVA’s work?

To create an Individual Voluntary Agreement, your insolvency practitioner will first take details of your financial information:

  • Income
  • Expenditures
  • Creditors
  • Debts
  • Assets
  • Any other relevant information

They will then work out how much you can afford to repay and how long the IVA will last. IVA’s usually last around 5-6 years but it’s mostly dependant on your income and how much money you owe.

Once your insolvency practitioner has worked out the details of your IVA, they will contact your creditors. At least 75% of the creditors must agree to your IVA proposal for the IVA to go ahead, your creditors may request some modifications, but your insolvency practitioner will be able to negotiate on your behalf until an agreement can be made. (https://www.gov.uk/options-for-paying-off-your-debts/individual-voluntary-arrangements)

An IVA can freeze interest on the debts you owe, stop creditors taking legal action against you to reclaim moneys owed (as long as you maintain your agreement), help you pay back your debt and potentially write some debt off at the end of your IVA term. You will pay a monthly sum to your insolvency practitioner who will distribute the funds accordingly to your creditors.

IVA’s can help pay off most common debts, such as;

  • Unsecured loans
  • Catalogue debts
  • Council Tax Arrears
  • Credits cards
  • Money owed to HM Revenue & Customs
  • Mortgage shortfalls
  • Overdrafts

IVA’s cannot be used to pay;

  • Magistrate’s court fines
  • Child Maintenance
  • Child Support arrears
  • Student loans
  • Certain car finance

You will have to pay your insolvency practitioner fees. There is usually a fee to set up your IVA and a handling fee for each monthly payment- some insolvency practitioners will include their fees in your monthly payment if you can’t afford the lump sum. If you enter an IVA, it’s important to be aware of possible fees and to be sure you can make the monthly payments, as your insolvency practitioner can cancel your IVA if you miss payments- making you liable for legal action taken by your creditors to reclaim money owed.

Your IVA will be added to the Individual Insolvency Register but will be removed 3 months after the IVA ends.